Legislature(1997 - 1998)
04/04/1998 01:15 PM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 36
"An Act relating to transportation of public school
students; relating to school construction grants;
relating to the public school foundation program and
to local aid for education; and providing for an
effective date."
SENATOR RANDY PHILLIPS, (TESTIFIED VIA TELECONFERENCE),
ANCHORAGE, testified that Alaska's public school foundation
formula is broken and needs to be fixed this year.
Alaska's five largest school districts serve almost 75% of
Alaska's students. These five districts receive 57% of the
State general fund support in the foundation program. The
remaining school districts, which serve 25% of school age
students, receive 43% of the State aid for operating
schools. At the same time, the five largest school
districts contribute approximately 72% of local tax revenue
which goes to operating schools in Alaska. The current
formula provides neither education equity for students nor
taxpayer equity between school districts.
For the past ten years, State funding for public schools in
Alaska has been distributed, based on a formula that
provides a disproportionate share of funding to small rural
school districts at the expense of larger districts.
Senator Phillips pointed out that the current formula makes
size adjustments by gathering students into "instructional
units" within "funding communities", and makes geographical
cost adjustments based on household cost of living
differential between school districts. Alaska is only one
of seven states that use instructional units instead of a
per student allocation. In the Alaska School Operating
Cost Study (McDowell Report) provided for the Legislative
Budget and Audit (LBA) Committee determined that the
definition of "funding communities" is not consistent. He
suggested that costs could better be compared at the school
level. SB 36 would adopt the changes recommended in that
report.
Senator Phillips stated that there are two major components
to the cost of providing school education which must be
accounted for in any formula that seeks to provide equity
in funding between school districts. Instructional costs
(approximately 70% of spending) consisting primarily of
teacher's salaries, vary based on the size of individual
schools. Administrative and non-personal service costs
(such as supplies, books, utilities) vary, based on the
size of a district, the district's location and the unique
circumstances of that district.
Senator Phillips continued, SB 36 distributes school
funding based on the actual costs of providing instruction
to students and the actual current costs of operating
school districts.
? Funding is allocated based on a per student
rather than an instructional unit value. The
public is better able to understand a per student
than a unit value.
? Size adjustment in formula is based on individual
schools instead of "funding communities".
? Adjustments for geographical cost differences are
based on a study of the actual costs of operating
school districts instead of the household cost of
living.
? The required local contribution for municipal
districts is set at four mills of assessed value
or 100% of district State support. Taxpayer
equity would be improved.
? Categorical funding is set at 20% of State
support plus funding for intensive-need students,
which will remove any incentive in the current
formula to identify students as special-ed in
order to qualify for additional funding.
? Funding for statewide correspondence study
programs offered by a district are set at .65
times Average Daily Membership (ADM), the same as
the State operated program. At least one school
district has several times as many students
enrolled in their statewide correspondence
program that live in their district. The
provision is intended to prevent districts from
being in the business of providing programs to
finance their operations.
? Provides reimbursement for district operated
pupil transportation at 90% of actual cost.
Currently, districts that contract for their
school buses are reimbursed 100% of their costs.
The Anchorage School District is reimbursed for
only 66% of its bussing costs.
? Districts are required to spend at least 70% of
school funding on instructional costs. The
Education Week "report card" distributed earlier
this year, criticized Alaska for spending too
much money on school administration and not
enough on instruction. In Alaska, approximately
70% of public school funding is spent on
instruction. Some districts spend about 75% on
instruction while others are spending closer to
39%.
Senator Phillips concluded, the changes proposed in SB 36
to Alaska's public school foundation formula would benefit
school districts that serve 84% of Alaska's children.
SENATOR GARY WILKEN provided an overview of a handout, SB
36 - A Proposal to Bring Simplicity & Fairness to the Way
Alaska Funds Its Public Schools. [Copy on File]. He
stated that since 1988, State of Alaska General Fund dollar
support to the public school Foundation Formula has
increased 54.3%. At the same time, the number of public
school students to be educated in Alaska has increased
27.9%.
Senator Wilken provided a historical review of public
school funding. In 1985, there was a one-year stopgap-
funding scheme adopted. In 1986, a re-write proved
impossible which was another one-year solution. In 1987,
after two years of different stopgap measures, a new
proposal was considered. Then in 1987, as a result of
several years of turmoil, a new proposal was adopted, even
though that legislation would be a "further setback" for
Railbelt taxpayers and students. In 1998, SB 36 proposes a
funding formula that is based on actual school costs and
that is fair.
Senator Wilken referenced the Alaska Education Survey.
[Copy on File]. The survey found that only one in three
Alaska voters believes that significant increases in
education funding would improve the quality of education.
He noted that the survey indicated that 81% of voters
believed that the State's method of funding schools should
be simplified and that 73% of voters support funding
education based on an amount per student, with additional
amounts added for special needs, rather than the current
method used addressing the instructional unit. He pointed
out that the Governor acknowledged this need and submitted
SB 85, introduced 2/12/97. Page 5 of Handout #1 provides
an analysis of SB 85 and SB 36.
Senator Wilken stated that SB 36 would consist of three
major efforts:
? Bases the formula on the actual cost of operating
a school. (McDowell Study)
? Converts from an "instructional unit" basis of
funding to a "student dollar".
? Would define a "fair share" for the organized
areas of the State. (4 mills or 100%)
SB 36 would address simplicity, fair share contribution,
categorical definition without verification and classroom
funding priority. Senator Wilken pointed out that the
legislation would not address the unorganized areas of our
State Rural Education Attendance Area (REAA) contribution
toward education.
Senator Wilken defined "fair share" as equal funding
participation by all districts based on assessed value of
an organized area. The assessed value would be used as it
provides an "arms length" relative evaluation of the wealth
or lack of wealth in a community; validated by an objective
civic and judicial process at no cost to the State. It
would be readily available from organized governments and
it could rise and fall annually.
Senator Wilken continued, Page 23 illustrates REAA wages
and employment with a total estimated wage around $460
million dollars. The 1996, State support to REAA's was
$135 million dollars. He suggested that was 28% of the
budget for 8% of the students. Senator Wilken urged that
those people be required to make a contribution toward
education.
Page 25 addresses categorical funding, i.e. monies
identified through the foundation formula for special
education needs such as gifted and talented, bi-lingual,
bi-cultural, and vocational education. In the current
formula, the school districts define and count funding
needs, creating the instructional unit. That unit is then
funded, although, audits are minimal and districts are not
required to spend the money for categorical needs. Senator
Wilken distributed a copy of an additional handout, The
Result of the Legislation. [Copy on File]. He
acknowledged that the makers of the legislation do
recognize that there are different costs associated with
educating children in different parts of the State.
SENATOR JOHN TORGERSON spoke to the 70% instructional unit
cap contained in the bill. SB 193 was introduced, which
placed a cap on the amount to be spent in both district and
for school administrative costs. The calculated average
was $950 dollars per student, a cost which was multiplied
by the area cost differential. That legislation would
switch approximately $21 million dollars from the
administrative area back into the classroom.
When the McDowell Report was issued, they recognized that
70% of the cost was being used for instruction and that an
area cost differential did not exist for that particular
segment of the budget. Senator Torgerson recommended that
school districts be consolidated and that administrative
costs be reduced. An administrative cap could control the
amount of money used for student allocation. The 70%
amount became the final number agreed upon through
recommendation by the McDowell Report.
Senator Torgerson pointed out that 92% of the Alaskan
people who pay for education receive 79% of those monies.
The 8%, who do not pay, receive 21% of the education money.
The question posed is how to require that 8% to pay. Many
considerations have been proposed in how to make the non-
paying areas contribute.
He advised that the Senate Leadership has decided to
proceed with SB 337, the mandatory borough issue, which
will make it mandatory in the formation of third class
boroughs, leaving out the single sites to require a local
contribution to education similar to that made by the
borough.
Senator Wilken acknowledged that there continues to be a
few concerns regarding the proposed legislation. The
Department of Education (DOE) needs to help define what a
"school" is; also, the North Slope Borough concern must be
addressed. He urged the Committee's cooperation to help
move the education concern beyond the status quo.
Representative J. Davies questioned if the need would be
determined by the assessed valuation. Senator Wilken
agreed that the issue is complicated. If a community
derives revenue from which they support their community,
with one tax base, their expenses should also be derived
off that same tax base.
Representative Grussendorf pointed out that the overview
does not address "quality" schools. Senator Wilken replied
that the school districts applied pressure to remove that
stipulation since it was an unfunded mandate. He pointed
out that language regarding that concern had been
reinserted into the bill in the version forwarded by the
last Committee's actions.
(Tape Change HFC 98- 90, Side 2).
Senator Torgerson commented that the total for "quality"
school funding was now at $2.2 million dollars, and that
Representative Bunde's amendment was for $500 thousand
dollars. Representative Grussendorf responded that the
$2.2 million dollars was only enough for development of the
plan and would not cover the implementation. He estimated
that the package would cost approximately $23 million
dollars.
Representative Grussendorf questioned the 70% minimum
expenditure for instruction. He suggested that amount
could probably work for a larger population area, but with
the high fixed costs in rural areas, it would cause
problems. Senator Torgerson replied that the
administrative cap was contained in an additional piece of
legislation, accompanied by a waiver requirement to address
the 70% issue. He noted that if the 70% concern could be
achieved, it would put $40 million dollars back into the
classroom. The waiver would first need to be submitted to
the Board of Education for consideration and then it would
move to the Legislative Budget and Audit (LBA) Committee in
report form.
RICHARD CROSS, DEPUTY COMMISSIONER, DEPARTMENT OF
EDUCATION, referenced a letter written 4/2/98 addressing
the Department of Education's (DOE) concerns with the
proposed bill relating to the public school funding
program. [Copy on File].
? Amendment #2 would impose a 3% wage tax for
employment within the unorganized borough. The
Department is seeking direction from the
Committee as to what tax revenue estimates should
be used in developing updated spreadsheets
incorporating the amendment.
? The local contribution requirement has raised
issues regarding the taxable full value of the
North Slope Borough (NSB). The Department of
Community and Regional Affairs (DCRA) is
determining the appropriate and taxable full
value of the NSB to be used in calculating
required local efforts. Resolution of the issue
will impact the amount of funding available for
redistribution under HCS CSSB 36 (HES).
? Page 14, Lines 19-31, and Page 15, Lines 1-2.
Requires that the Department develop a
comprehensive assessment system. The requirement
mirrors language in the Governor's quality school
bill, HB 351/SB 257. The fiscal note for those
bills would amount to $3.6 million dollars to
develop a system and would include an additional
$20 million dollars to assist school districts
with the cost of implementing the assessment
program.
? Page 5, Lines 6-9. Requires districts to have on
file with the Department, a plan of service for
special education, gifted and talented education,
vocational education, and bilingual education.
It is the Department's understanding that these
would not be required in order to receive the 20%
allocation. The Department believes further
clarification of this language is needed.
? Page 6, Line 10. The school size table is very
aggressive in applying multipliers for adjusted
ADM. Depending on the definition of "school",
Mr. Cross stated that the table raises many
issues.
? Page 6. The current foundation program has a
three year hold harmless for school districts
that experience a drop in enrollment of 10% or
more from one year to the next. The proposed
legislation does not contain a similar safety
net.
? Page 8, Lines 19-23. That would require the
Department to adjust district cost factors by the
Anchorage Consumer Price Index (CPI) and submit
proposed district cost factors to the legislature
every other year. The Department contacted the
McDowell group for advice in meeting the
requirement. The group stated that the Anchorage
CPI has no relationship to district cost factors
and that inflationary adjustments should occur
elsewhere in the legislation. The McDowell group
also indicated that DOE could not apply the same
methodology they used in determining the proposed
district cost factors to meet the requirement in
SB 36. The McDowell Report did provide
additional information to the Chairman of the
House HES Committee to suggest alternative
methodology.
? Page 10, Line 5. References minimum expenditure
for instruction. Most districts can not meet the
requirement due to fixed costs to operate
facilities. Only school districts with large
student population and the larger schools can
meet that requirement.
? Page 11, Line 2. The definition of "instruction
component" is inconsistent with the existing
chart of accounts.
? Page 27, Line 12. Subsection (b) requires the
Department to define "school". Current
regulation 4 AAC 05.900(5) defines a school as a
"program of instruction". There is a lack of
data to support a consistent definition of
"school". As the definition is clarified, a
significant reallocation of dollars will occur.
? Page 27, Lines 14-17. Transition for proposed
district cost factors, requires the Department to
submit to the Legislature, proposed district cost
factors by January 15, 2001. As previously
stated, the McDowell group informed DOE that
their methodology can not be used to update
proposed district cost factors.
? Page 16, Line 12. This section would remove the
requirement to employ a chief school
administrator. If districts hire a non-certified
administrator to run the school district, the
administrator would not be subject to the ethic
requirement of the Professional Teaching
Practices Commission (PTPC).
Mr. Cross concluded his testimony and offered to answer
questions of the Committee. SB 36 was HELD in Committee
for further consideration.
(Tape Change HFC 98- 91, Side 1).
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